Japan's decision to boost auto exports to the United States by 450,000 cars a year will eliminate most dealer premiums on Japanese cars by the end of 1985, several auto industry analysts and officials said yesterday.
The premiums -- also known as "Seller's Reconciliation," "Add-A-Tag," "Dealer's Supplement" and "Additional Dealer's Markup" -- are mostly arbitrary, extra charges many dealers put on cars that are in high demand.
In the Washington area, those premiums often have added $1,000 -- and up to $5,000 in some cases -- to manufacturers' suggested retail prices listed on federally mandated manufacturers' labels on new-car windows.
The markups -- mostly on Japanese cars -- became popular among dealers after April 1, 1981, when quotas first were imposed on the shipment of Japanese autos to the United States.
Current quotas, which end tomorrow, officially limit Japanese exports to the U.S. auto market to 1.85 million cars a year.
The Japanese government will keep restraints for a fifth year, but at the 24 percent higher level of 2.3 million cars.
That growth should be enough to deflate dealer premiums by the end of the calendar year, said Scott Merlis, an auto industry analyst with New York-based Shearson Lehman American Express.
"Towards the end of 1985, the import dealers will stop charging extra for every little frill, whistle and bell. The dealer premiums will come down," Merlis said.
What remains unclear is how increased Japanese auto exports will affect overall car pricing in the U.S. market, Merlis and other analysts and industry officials said.
"The 450,000 units are significant. But the question is how the increase will be allocated" among Japanese auto makers "and what kinds of cars the manufacturers will send to the United States," said Toni Harrington, spokeswoman for American Motor Honda Co. Inc., a U.S. subsidiary of Honda Motor Co. Ltd. of Japan.
"Until it's known how those extra units are going to be distributed and what kinds of cars they're going to be, it's premature to say how the higher quota ceiling is going to affect price," Harrington said.
Under the quota system, Japan's Ministry of International Trade and Industry allocates auto exports to this country based on each Japanese auto maker's performance in the U.S. market in the previous year.
That means Japan's largest auto companies, such as Toyota Motor Corp., normally get the biggest allocations.
But big Japanese auto makers have been pumping relatively expensive cars ($10,000 and up) into the U.S. market in an attempt to take maximum advantage of high consumer demand. Less expensive cars (in the $6,000 range) are rolling in from smaller auto makers like Japan's Isuzu Motors Ltd. But the makers of smaller Japanese cars have had to make do with severe export restrictions under MITI rules.
At least one U.S. auto maker, Ford Motor Co., believes that the higher level of Japanese exports will have no effect on the prices of American cars -- particularly the small models that compete directly with most Japanese exports.
"U.S. small cars already are being sold from $500 to $1,000 less, on average, than comparable Japanese models," said David N. McCammon, Ford's vice president and controller.
"The Japanese will have to come way down in their prices to affect us," McCammon said.
Both McCammon and Harrington agreed with Merlis' assessment that the most immediate result of the higher quota ceiling will be the evaporation of dealer premiums on Japanese cars sold in this country. "Most of the car price increases over the last four years have been in the transaction price," the actual price, including all charges, that the consumer agrees to pay for his or her car, McCammon said.
Transaction prices are affected by dealer premiums. "But there probably will be some room for reduction in dealer premiums" under the new quotas, McCammon said.